A Response to Dennis P. McCann

Controversy

Abstract

Though I am not an Aristotelian there is something the philosopher says that applies to the question of moral responsibility in business. Aristotle claims that institutions are to be understood in terms of their purpose, i.e., the telos that constitutes their fundamental aim. I argue that the purpose of the corporation is to realize long-term owner value, which is why corporations were set up in the first place. However, any departure from this goal, and non-owning managers are skilled at diverting attention away from a corporation’s fundamental purpose, is potentially fatal. A manager’s fiduciary duty is first to act in the best interest of the owners, yet a manager’s immediate self-interest lies in protecting his or her job. I think this tension explains why managers became active lobbyists of anti-takeover legislation throughout state legislatures in the late 1980s. The academic “discipline” of business ethics has proven to be a convenient shroud behind which some purely self-interested, rent-seeking managers have prospered.